DP13247 Job Displacement, Family Dynamic, and Spousal Labor Supply

Author(s): Martin Halla, Julia Schmieder, Andrea Weber
Publication Date: October 2018
Keyword(s): Added Worker Effect, Firm Events, Household Labor Supply, Intra-household Insurance
JEL(s): D19, J22, J6
Programme Areas: Labour Economics, Public Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=13247

We study the effectiveness of intra-household insurance among married couples when the husband loses his job due to a mass layoff or plant closure. Empirical results based on Austrian administrative data show that husbands suffer persistent employment and earnings losses, while wives' labor supply increases moderately due to extensive margin responses. Wives' earnings gains recover only a tiny fraction of the household income loss and, in the short-term, public transfers and taxes are a more important form of insurance. We show that the presence of children in the household is a crucial determinant of the wives' labor supply response.